Yield-bearing stablecoins could fuel risky parallel banking system

JPMorgan chief financial officer Jeremy Barnum warned that yield-bearing stablecoins risk creating a parallel banking system without proper regulatory safeguards.

The comments were made during JPMorgan Chase’s fourth-quarter earnings call following a question on digital asset regulation.

Barnum said the bank supports blockchain innovation but opposes stablecoin models that resemble interest-paying deposits outside banking oversight.

The creation of a parallel banking system that sort of has all the features of banking, including something that looks a lot like a deposit that pays interest, without the associated prudential safeguards, is an obviously dangerous and undesirable thing.

Jeremy Barnum said.

He added that JPMorgan’s stance aligns with the proposed GENIUS Act, which aims to set strict guardrails around stablecoin issuance.

US banking groups have previously raised alarms that yield-bearing stablecoins could disrupt traditional deposit-based business models.

Stablecoins have expanded rapidly as tools for payments and settlement, intensifying scrutiny as lawmakers debate tighter oversight.

US lawmakers are considering restrictions that would ban interest or yield paid solely for holding stablecoins.

Draft legislation would still allow certain incentives linked to broader crypto activities such as liquidity provision or staking.